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G.M. Bankruptcy Could Affect Liability Claims

Current owners of General Motors vehicles could soon have something in common with the owners of Chrysler vehicles: the inability to sue for future injuries they believe were caused by safety defects.

In its recent bankruptcy filing, G.M. asked that the assets of the new company that emerges from bankruptcy be “free and clear of all successor liability claims.” It is an attempt to prevent the new G.M. from being financially responsible for injuries caused by vehicles already sold, said Adina Rosenbaum, a lawyer for Public Citizen, a consumer advocacy group.

Avoiding those obligations could save G.M. a lot of money. Last year it paid about $921 million to settle product-liability claims, according to G.M.’s filing with the Securities and Exchange Commission. In 2007 the payments topped $1.1 billion.

Tom Wilkinson, a G.M. spokesman, declined to comment on whether current owners would be able to sue in the future. Instead, he provided a statement that said: “All claimants will have the opportunity to submit their claims and have them resolved as provided by the Bankruptcy Code and other applicable law, both as to amount and priority. We won’t discuss specific claims or the possible outcomes, as that will be determined by the court.”

Over the weekend, a federal bankruptcy judge approved the sale of most of Chrysler’s assets to a new company to be run by Fiat and granted a request that current owners not be allowed to sue.

Consumer groups, including Public Citizen, Consumers for Auto Reliability and Safety and the Center for Auto Safety objected to that provision. They said not only did it take away consumers’ rights, but it would also create hard feelings among current owners that will hurt the new automaker’s chance of success. The groups planned to appeal.

As with the Chrysler case, the G.M. bankruptcy filing would also put consumers who are already suing the automaker — and receiving an award — among the unsecured creditors. Several law professors have said those consumers were likely to receive a fraction of what they would have received if G.M. did not file for bankruptcy.

Thanks so much for your ongoing coverage of this important issue. A news conference was held in Washington DC today to draw attention to this terrible state of affairs. //www.centerjd.org/ It seems important to emphasize that those catastrophically injured by defective products produced by GM and Chrysler must not be viewed as “collateral damage” in some larger corporate shake-up. They are human beings and they deserve their day in court, bankruptcy or no.

“As with the Chrysler case, the G.M. bankruptcy filing would also put consumers who are already suing the automaker – and receiving an award — among the unsecured creditors. …consumers were likely to receive a fraction of what they would have received if G.M. did not file for bankruptcy.”

Please keep in mind that neither GM nor Chrysler chose to enter bankruptcy. GM, for example, fought hard to stay out of bankruptcy. And while it is true that many creditors get less than full recovery in a chapter 11 filing, they get more than they would if companies tumbled into uncontrolled liquidation, which is what would happen without a well-tested bankruptcy process. Also, the process is intended to balance the claims of many different creditors, all of whom are genuinely hurt by the bankruptcy.

In Germany your are free to drive as fast as you want on the autobahn and if you kill your self doing so, that is consequence, end of story….hopefully you don’t take anyone down with you. There is no where near the number of lawsuits there vs. the US, where every ridiculous detail is examined regarding auto accidents vs. what really should be the issue…was there willful negligence in the case of the automaker – full stop.

This behavior is driven by the litigious environment here in the US where lawyers typically pocket 50%+ of settlemens and lack of comprehensive national health care. These are the root of the problems. Lawyers are only too happy to file lawsuits galore to line their pockets And people with lousy health care and insurance companies looking not fulfill their obligations look to the auto companies to pay so they don’t have to.

The press does not help either, poor Audi got hammered back in the 90’s from the totally bogus “unintended acceleration issue.”

The bankruptcy code should remain as is. GM and Chrysler liabilities are just red herrings for the real policy problems of a sue happy country and lack of national health care.

Audi was a case of unintended consequences when designers attempt to get TOO slick. Every electrical tech that did much work on early PLC systems knew about this effect. Eventually, the engineers caught up.

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